Thomas Newall Ltd v Lancaster City Council

There are three applications for permission to appeal before the court, all arising out of the same litigation. In each case the appellant is Thomas Newall Limited, the claimant in proceedings for compensation arising from a compulsory purchase order in relation to a redundant mill known as St George’s Works, St George’s Quay, Lancaster (“the Mill”). The respondent and defendant in those proceedings is the Lancaster City Council (“the Council”). I will call the appellant the Claimant.

In the barest outline, the compensation proceedings began in or about 2007, and compensation for the purchase, and for disturbance, was sought by reference to a contractually agreed valuation date of 1 August 2006.

Preliminary issues relevant to valuation were determined by the Tribunal on 8 February 2010, and costs reserved until the outcome of the proceedings, by an addendum decision on 29 March 2010.

The main valuation hearing took place in October 2011 (over 5 days) followed by a draft decision on 15 December. Further representations and a resumed hearing in May 2012 led to a final decision on 25 June 2012 determining compensation payable to the claimant as £2.045 million odd.

Since that outcome was better (although only by £10,000) than the Council’s prior offer, the Tribunal ordered the Council to pay the Claimant’s costs, on 4 September 2012.

Meanwhile the Council appealed and, on 11 July 2013 the Court of Appeal set aside the Tribunal’s 2012 decision, and reduced the amount payable to £2.013 million odd. Since this fell slightly short of the Council’s offer, the Tribunal made a fresh order on costs, on 16 October 2013, whereby the claimant was ordered to pay 90% of the Council’s costs from the date of its offer, namely 25 March 2009, but only 80% of the Council’s costs of the main valuation hearing.

The main reason why the Tribunal reduced by 20% the Council’s recovery of costs of the valuation hearing arose from its disapproval of the lack of candour of the Council’s expert witness, a Mr Massie, in failing to disclose his earlier 2006 valuation of the Mill in the sum of £2 million, when giving written expert evidence of his later valuation, for the purposes of the proceedings, in the sum of £650,000. In the event, the Tribunal had adopted as its own valuation a sum broadly equivalent to the earlier view of Mr Massie, in the sum of £1.77 million, rejecting an even higher valuation by the Claimant’s expert, a Mr Asher, at £2.8 to 3.2 million. The Tribunal’s valuation adopted most of Mr Massie’s inputs to the £2 million calculation, and differed from his conclusion mainly because of a different approach to floor areas. The main reason for the large difference between Mr Massie’s £2 million valuation and his valuation of only £650,000 in his expert’s report was because he deducted an amount equivalent to the difference on account of hypothetical renovation costs, which the Tribunal disallowed.

Following the disastrous outcome (in terms of costs) of the modest reduction in the compensation payable ordered by the Court of Appeal, the Claimant embarked upon a vigorous campaign designed to have the proceedings entirely reheard. The campaign seeks to make use of two sources of documents which the claimant seeks to introduce as fresh evidence. The first is the fruits of a Freedom of Information (“FOI”) request to the Council, which the Claimant received on 5^th April 2013. The second consists of entries in the bill of costs submitted by the Council’s solicitors, Eversheds, in the course of detailed assessment proceedings.

The sheet anchor of the Claimant’s campaign to overturn the outcome of the compensation proceedings, and obtain a new trial, consists of an even earlier “preliminary valuation estimate” by Mr Massie, in 2004, setting out what he described as his “preliminary thoughts” which had placed a value of £2.8 million on the Mill. Although the Claimant had obtained this as a result of the FOI request, in April 2013, its existence (but not the amount of the valuation of the Mill) had been known to the Claimant since, at the latest, the hearing of the preliminary issues in 2010, and had been in the mind of Mr Loxam (a director of the Claimant who has appeared for the Claimant on these applications, and who took a main role in the pursuit of the proceedings for the Claimant) at the time of the main valuation proceedings in late 2011.

The main basis of all three of the Claimant’s present applications is that this material shows that Mr Massie had been dishonest throughout, that the Council and its solicitors had known the truth throughout, and that therefore all the decisions made thus far in the proceedings should be set aside, and the matter reheard.

To sum up Mr Loxam’s most impressive 24 page speaking note dated 14 January 2016, fraud unravels all. As now presented, the materials sought to be relied on as fresh evidence include a number of other documents, to a few of which I shall refer in due course, but Mr Massie’s preliminary valuation estimate in 2004 has, from start to finish, been the make or break element in the materials.

The Claimant’s campaign began with an application on 15 November 2013 to the Tribunal, to review its October 2013 decision, or alternatively for permission to appeal against it. After an exchange of written submissions, this application was rejected with full reasons on 14 March 2014. It was squarely based on the 2004 preliminary valuation, but sought in addition to make a point about the issue as to floor areas.

On 18 April 2014 (after the time for appealing the October 2013 decision had expired, on 4 April 2014) the claimant sought a review of the March 2014 decision or alternatively permission to appeal, and permission to appeal the Tribunal’s preliminary issues decision of March 2010. This time, the Claimant sought to rely on a series of further documents as fresh evidence, in addition to the 2004 valuation estimate. Again, after an exchange of written submissions, those applications were rejected by the Tribunal, this time on a summary basis without full reasons, on 30 May 2014. Application for permission to appeal those two decisions was made to this court on 15 July 2014, after an earlier application had been rejected. The application in relation to the preliminary issues decision is numbered 2014/2686. The application in relation to the final decision, with costs addendum, made by the Tribunal in October 2013, is numbered 2014/2687.

Both applications were refused on the papers by Vos LJ on 19 June 2015, broadly for the same reasons as had been given by the Tribunal in March 2014. In short, none of the Ladd v Marshall tests for the admission of fresh evidence were satisfied, and the application did not disclose special circumstances, such as fraud, for the admission of the evidence nonetheless.

Meanwhile, proceedings for the assessment of the Council’s costs continued. On 27 January 2015 the Tribunal issued a Registrar’s direction requiring a payment on account by the Claimant in the sum of £340,100 within 14 days. The claimant responded with a request for reconsideration in February, while the Council sought a debarring order by reason of the Claimant’s failure to make the payment on account, in March. In response, the Claimant applied for a wasted costs order against the Council’s solicitors, Eversheds.

On 14 May, the Tribunal refused the application for a wasted costs order, with reasons, and extended time for the Claimant to comply with the order for an interim payment, making a debarring order in default and a further debarring order unless by 15 June the Claimant served points of dispute in relation to the Council’s bill of costs.

After a further application for a stay, the Tribunal made a further order on 2 July 2015, refusing the stay, refusing permission to appeal from its May order and further extending the time for making the interim payment until 20 July 2015. This appeal is numbered 2015/2741. Since the application for permission followed the decision of Vos LJ on the papers in relation to the two earlier applications, it has been ordered to be dealt with on this oral application, together with the renewed oral application on the first two appeals. The claimant made an application in writing for this third application to be dealt with separately, and first on paper, which I refused. No injustice would be caused to the claimant by having all three heard together, and this would achieve a sensible saving of time, effort and expense.

More recently, applications for wasted costs orders against Mr Massie and his firm have been made to the Tribunal and dismissed by a recent decision on 11 January 2016.

It is convenient to take Appeal 2687 first, since this seeks to have reheard the main valuation hearing, on the basis of fresh evidence which, it is said, shows that Mr Massie was lying, with the Council’s knowledge, in relation to his opinion of value. As will appear, if the Claimant cannot show a real prospect of success or other compelling reason for an appeal in relation to that decision, then its prospects in relation to the other two appeals are likely to be poor indeed.

The Claimant’s grounds of appeal may be summarised thus:

The main question is whether the Claimant has any real prospect of persuading the court to admit the fresh evidence relied upon. In this respect the Tribunal decided (in its reasons for refusing the Claimant’s application on 14 March 2014) that an application to admit this evidence would fail all three of the well known tests in Ladd v Marshall and that, balancing the public interest in finality against the public interest in discouraging fraudulent claims, there was no exceptional basis for admitting the fresh evidence if the Ladd v Marshall conditions were not satisfied.

The first test requires the court to ask whether the fresh evidence could have been obtained by the Claimant, exercising reasonable diligence, before the valuation decision in June 2012. The Tribunal concluded that the Claimant through Mr Loxam knew that Mr Massie had provided an opinion or budget estimate in 2004 which must have included a valuation of the Mill, but not that he knew what that valuation was. Nonetheless the Claimant was vigorously contesting Mr Massie’s £650,000 valuation, with full legal representation, inter alia on the basis of his earlier £2 million valuation in 2006, full details of the workings underlying it being before the court. Reasonable diligence would have enabled the Claimant to obtain the 2004 valuation estimate, and all the documents later disclosed in response to the FOI request, as further potential ammunition, by way of a request for disclosure, followed by an application to the Tribunal for a disclosure order.

More seriously, the Claimant knew of the £2.8 million preliminary valuation well before the hearing of its appeal against the valuation decision, yet did nothing to pursue any case based upon it (again while legally represented), either by way of a cross appeal or an application to admit further evidence. Mr Loxam submitted (correctly) that the appeal by the Council had nothing to do with the valuation of the Mill, but this misses the point. The appeal was against the valuation decision which included the valuation of the Mill as its main element, so that a challenge to it on the basis of fresh evidence by then available could and should have been mounted immediately, by way of cross appeal. Doing the best I can, it seems to me likely that the Claimant decided to take its chance on the appeal as it was then constituted rather than raise this valuation as potential fresh evidence at the earliest possible opportunity. No other plausible explanation for not doing so has been provided, bearing in mind that the Claimant was then represented by solicitors, as well as junior and leading counsel.

I can take the second and third Ladd v Marshall conditions together; they require it to be asked whether, if admitted, the fresh evidence would probably have an important influence on the outcome, and whether the evidence is inherently credible. The difficulty with answering either of those questions in the affirmative is that the 2004 document is on its face only a “preliminary valuation estimate” reflecting the writer’s initial thoughts, after an exercise undertaken without full information or detailed investigation.

I am no more persuaded than was the Tribunal or Vos LJ that these second and third Ladd v Marshall tests are satisfied in this case. Valuers frequently make substantial revisions to early preliminary views, after conducting a thorough and professional investigation. I am by no means persuaded that it is even arguable that, had the Tribunal been in possession of the 2004 preliminary valuation, it would have considered that Mr Massie’s £2million later valuation was neither honestly given or genuinely held. It was supported by detailed calculations and analysis which were before the Tribunal, and much of which the Tribunal adopted in its own expert appraisal. As it was, the Tribunal rejected Mr Massie’s much later £650,000 valuation in any event.

Separately, the Claimant seeks to admit fresh evidence which it submits demonstrates that a further adjustment had to be made to Mr Massie’s valuations because of the basis upon which he had assessed the Mill’s floor areas. The Tribunal dismissed these documents on the basis that they, or the existence of them, were all known about by the Claimant before the main valuation hearing. I can see no reason to take a different view from that taken by the Tribunal on this point in March 2014, nor indeed how there is any real prospect that a full court would do so either.

The Claimant also relies on FOI documents which tend to show that Mr. Massie’s £2 million valuation was a certified opinion. In my view this adds nothing to the impression which his full workings, available at the valuation hearing, conveyed to the expert Tribunal, because it adopted so much of it.

Finally, the real difficulty in the Claimant’s way in persuading a full court to soften the Ladd v Marshall conditions when considering whether to admit the fresh evidence tendered is that it simply does not begin to demonstrate that Mr Massie was lying when advising a £2 million value in 2005, upon which, in any event, the Tribunal had proceeded. There is, quite simply, no real prospect that the Claimant will be able to demonstrate that this is a case of fraud, still less a fraudulent conspiracy in which Mr Massie, the Council and its solicitors were all complicit. The Tribunal was critical of Mr Massie’s lack of candour in presenting an expert report, valuing the Mill at £650,000 without at the same time disclosing his £2 million valuation, but this had been remedied by the time of the hearing, when his full workings were made available.

Turning to the appeal against the preliminary issues decision, it follows that, to the extent that it gave credit to Mr Massie as an honest professional witness, the challenge based on the 2004 preliminary valuation fails in limine, for the reasons already given. But Mr Loxam responded to my invitation to concentrate orally on his next best points with the following two, the first based the FOI materials, and the second on Evershed’s bill of costs. I will deal briefly with both of them.

The first preliminary issue, which the Tribunal answered in the negative, was whether the Claimant would have obtained planning permission for its own development of the Mill, viewed as at the valuation date in August 2006. The second, in bare outline, was what were the Claimant’s prospects of obtaining planning permission thereafter, viewed prospectively from the valuation date. The answers to these questions depended to some extent on funding questions. In particular the main reason advanced for the Tribunal’s negative answer to that first question was because a grant of planning permission for the development of the Mill on its own would conflict with the development of the larger area of which it formed part, under a scheme promoted by the Council for which it (or its developer) needed funding.

Mr Massie’s evidence was that the funding issues relating to the Council’s preferred scheme were, at the relevant time, finely balanced. Mr Loxam submitted that the FOI disclosure demonstrated that there was in fact a much wider funding gap than Mr Massie had been prepared to acknowledge. He accepted that part of the documentation on which he relied post-dated the valuation date.

Again, this material could all have been obtained before the preliminary issues hearing with due diligence, by an application for disclosure along similar lines to the FOI application. Furthermore, my reading of the preliminary issues decision makes it look most improbable that the Tribunal’s very firm negative answer to the first issue would have been affected in any significant way by a different perception about any funding shortfall then affecting the Council’s preferred scheme. Furthermore, Mr Loxam’s attempt to paint this as a reprehensible case of non-disclosure by the Council is misconceived. The Council was under no such obligation, in the absence of an order for disclosure, for which the Claimant did not apply.

The second point arising from the allegedly fresh evidence concerns the Tribunal’s observation, in relation to the second preliminary issue, that there was doubt about the funding for the Claimant’s scheme, evidenced from letters sent to the Council’s solicitors by the relevant two prospective funders. The Tribunal had asked to be shown the communications from the Council (or its solicitors) which had prompted the rather negative replies from the two funders. In response the Council had produced two letters, to which reference in the replies had been made. Scrutiny of Eversheds’ bill of costs shows that it is likely that the funders’ letters were very carefully planned, by a process which included Eversheds sending skeleton drafts to the funders of the letters they wanted them to write, and discussing amendments with them.

Mr Loxam acknowledged that he could produce no note or transcript of the Tribunal’s request for the letters to which the funders responded, so that it is not possible to be precise about precisely what had been asked for. Nonetheless he said that the bill of costs showed for the first time that the letters had been, as he put it, “concocted” by which he said he meant, in response to my enquiry, that they were the product of a fraudulent conspiracy to which the Council, the funders and Eversheds were all party, to create the false impression that there was any doubt about funding for the claimant’s preferred scheme.

In this case it cannot be said that reasonable diligence would have revealed this information in time for the preliminary issues hearing. But the second and third Ladd v Marshall tests remain unsatisfied. The insuperable difficulty facing the Claimant is that the material relied upon does not begin to demonstrate that, however they had been prepared, the funders’ letters once signed and delivered did not represent a true statement of their views. For that reason, this element of the appeals does not stand any real prospect of success.

I can deal with this application quite shortly. The burden of the Claimant’s case is that the Eversheds bill of costs reveals all sorts of dishonest or improper practices perpetrated by that firm in the conduct of the litigation, including the concoction already described, training and coaching of witnesses, drafting and amending witness statements, and colluding in the dishonest presentation of expert evidence by Mr Massie.

After reviewing that (written) application in its lengthy detail, Mr Rodger QC, Deputy President of the Tribunal, summarised the basis of the wasted costs jurisdiction, and then continued:

“27.

The claimant’s application runs to 31 pages and asks that the whole of the costs which it incurred in the reference, totalling £718,971 should be ordered to be paid to it by Eversheds. The basis of that contention is, essentially, that Eversheds were aware of information concerning the viability of the acquiring authority’s scheme, the true views of Mr Massie, the availability of public funding to support alternative development schemes and a catalogue of other matters, and that it colluded with the acquiring authority in concealing that information from the Tribunal in order to defeat the claimant’s entitlement to proper compensation. A great deal of the material relied on has already been deployed in support of the claimant’s applications for the Tribunal’s decision to be set aside and for disclosure in the detailed assessment. Additional material is also relied on but the overall effect of the document is to revisit many of the issues investigated by the Tribunal in the two substantive hearings in this reference with a view to demonstrating that the Tribunal was deceived in the evidence given on behalf of the acquiring authority.

28.

I do not propose to consider the material relied on in any detail. The application is a further attempt to mount a collateral attack on the Tribunal’s conclusions in the reference. It provides no basis for a conclusion that Eversheds have or may have acted improperly, unreasonably or negligently let alone that the whole of the costs incurred by the claimant in this reference were incurred as a result of such conduct. The Tribunal has already considered the conduct of the claimant’s expert witness in being less than frank about his previous valuations of the claimant’s property. The Tribunal marked its disapproval of that conduct by reducing the costs awarded to the acquiring authority by 20% (see paragraphs 231 and 235 of the Tribunal’s decision in costs of 16 October 2013). The suggestion that a sanction against the claimant’s solicitors is also appropriate is untenable and I dismiss the application.”

Having considered all that has been written and said by Mr Loxam for the Claimant, all that I need to say is that there is in my clear view no real prospect that the full court would find anything to fault in that exercise by the Tribunal of its exceptional discretion whether to make a wasted costs order.

For these reasons, all three of these applications must be refused.

Mr Roots QC has asked that, in the event that I decided to take that course, I should also make an order for payment by the Claimant of his and Eversheds’ costs of attending the hearing, and preparing very large bundles for the further assistance of the court, together with written submissions. The court did invite attendance, although not the very large amount of written materials and documents also submitted, which I am bound to say were wholly disproportionate to applications of this kind. Mr Roots also made very short submissions on two isolated points at my request.

The Council by letter to the Claimant warned of this costs application in advance, stating that it would limit the costs sought to £5,000. Mr Roots emphasised, very properly, that his professional and lay clients face very serious allegations of dishonesty and misconduct by the Claimant.

In the circumstances, I will make that order for costs, summarily assessed in the sum of £5,000. This is no doubt, as Mr Roots submitted, a fraction of the costs actually incurred, but a sufficient recompense for the time and trouble taken on the Council’s behalf to assist the court at its own request.